View full case

MAGDALENA HIDALGO v. REPUBLIC

FACTS:

The case involves a dispute between the petitioners, who are employees of respondent Armed Forces of the Philippines Commissary and Exchange Services (AFPCES), a unit/facility of the Armed Forces of the Philippines (AFP). AFPCES is engaged in providing commissary facilities and is intended to benefit veterans, their widows and orphans, and members of the AFP and their dependents.

The petitioners were regular employees of AFPCES and held various positions. However, AFPCES advised the petitioners to take an indefinite leave of absence without pay, with the promise that they would be allowed to return once AFPCES' tax subsidy is released and store operations resume. When AFPCES failed to recall the petitioners, they filed a complaint for illegal dismissal with damages before the National Labor Relations Commission (NLRC).

The Labor Arbiter ruled in favor of the petitioners, ordering AFPCES to pay back wages, 13th month pay, and separation pay. AFPCES appealed the decision but failed to post the required appeal bond, resulting in the dismissal of their appeal. The petitioners then moved for the execution of the Labor Arbiter's decision, which was granted by the NLRC's enforcing sheriffs.

AFPCES filed a petition before the Court of Appeals, seeking to enjoin the NLRC from dismissing the appeal and granting execution of the Labor Arbiter's decision. The Court of Appeals denied AFPCES' request for a temporary restraining order, but later granted their motion to lift the writ of garnishment and stay the execution of the monetary award. The Court of Appeals held that complaints for illegal dismissal against AFPCES should be lodged with the Civil Service Commission (CSC) instead of the NLRC.

The petitioners moved for reconsideration, but it was denied. Thus, they filed a petition for review on certiorari with the Supreme Court, primarily questioning the jurisdiction to hear complaints for illegal dismissal against AFPCES, a government agency engaged in a proprietary function.

ISSUES:

  1. Whether AFPCES is a government agency that is not immune from suit since it is engaged in proprietary activities.

  2. Whether the classification of AFPCES as a government agency means that its personnel should be classified as government employees and should be governed by appropriate civil service laws and procedures.

  3. Whether AFPCES can be considered a government-owned or controlled corporation with original charter, thus making its civilian employees government employees covered by the Civil Service Law and rules.

  4. Whether the civilian employees of the Armed Forces of the Philippines Commissary and Exchange Service (AFPCES) are government employees covered by the Civil Service Law and rules.

  5. Whether the Civil Service Commission (CSC) has jurisdiction over the complaint for illegal dismissal filed by the civilian employees.

RULING:

  1. Yes, AFPCES is a government agency that is not immune from suit since it is engaged in proprietary activities. The historical background of its creation and establishment indicates that AFPCES is an agency under the direct control and supervision of the AFP as it was established to take charge of the operations and management of all commissary facilities in military establishments all over the country.

  2. Yes, the classification of AFPCES as a government agency means that its personnel should be classified as government employees and should be governed by appropriate civil service laws and procedures. Any appointment, promotion, discipline, and termination of its civilian staff should be governed by civil service laws and procedures.

  3. No, AFPCES cannot be considered a government-owned or controlled corporation with an original charter. The Letter of Instruction (LOI) 31-A, which created AFPCES, does not specify the composition, specific functions, governing board, powers, and limitations of AFPCES. Therefore, AFPCES does not have corporate features and does not exercise corporate powers. Accordingly, its civilian employees cannot be considered as government employees covered by the Civil Service Law and rules.

  4. The Commission ruled that the civilian employees of the AFPCES are not government employees covered by the Civil Service Law and rules. While their employment should have been made in conformity with pertinent civil service regulations, the failure to do so does not negate the fact that they are government employees.

  5. Despite the AFPCES insisting that the employees are government employees under the jurisdiction of the CSC, the CSC disavowed any jurisdiction over them. The Court held that the proper body with jurisdiction is the CSC, as the employees are government personnel employed by an agency attached to the Armed Forces of the Philippines (AFP). The Labor Arbiter's decision on the complaint for illegal dismissal, therefore, issued without jurisdiction, is null and void.

PRINCIPLES:

  • Government agencies engaged in proprietary activities are not immune from suit.

  • Government agencies are classified as government employees and are governed by civil service laws and procedures.

  • Government-owned or controlled corporations with original charters are embraced by the civil service.

  • The absence of corporate features and the lack of exercise of corporate powers may determine whether an entity can be considered a government-owned or controlled corporation.

  • The regulation or law creating the service determines the position of the employee, not the absence or presence of the required appointment or the membership of an employee in the Social Security System or the Government Service Insurance System.

  • Any decision issued without jurisdiction is a total nullity and may be struck down at any time.

  • The CSC has jurisdiction over government employees, even if the proper civil service procedures were not followed in their employment.

  • The AFPCES should not be allowed to use its inefficiency in observing civil service rules to prejudice the employment status and rights of the petitioners.